Pound to Indian Rupee Exchange Rate (GBP/INR) Tumbles on Disappointing UK Sales and Inflation Data despite Indian Rupee Weakness
Broad weakness in the Indian Rupee (INR) has not helped the Pound to Indian Rupee (GBP/INR) exchange rate to hold its best 2018 levels, as a disappointing UK inflation report led to a Pound (GBP) selloff.
GBP/INR opened this week at the interbank level of 92.92, and on Tuesday the pair briefly jumped to hit a yearly high of 94.33. This was the best level since the 2016 Brexit vote.
While GBP/INR has since been sold from these highs due to Pound weakness, the pair was still trending above the week’s opening levels and near the interbank level of 93.35 at the time of writing.
The main reason for the Pound’s fall on Wednesday was news that UK inflation was slowing at a quicker pace than expected.
This worsened concerns that the economy may not be able to sustain as many interest rate hikes over the coming year as investors hoped for. Bank of England (BoE) interest rate hike bets have fallen and the Pound outlook dampened.
Pound (GBP) Exchange Rates Held Back by Underwhelming UK Datasets
Sterling (GBP) had been supported earlier in April by market expectations that the Bank of England (BoE) would hike UK interest rates in May, despite some underwhelming UK ecostats.
However, the Pound has fallen as the latest UK Consumer Price Index (CPI) results indicated that the BoE may need to dial back its hawkishness on monetary policy.
UK inflation was forecast to have slipped from 0.4% to 0.3% in March, but has remained at 2.7% year-on-year.
The results came in at only 0.1% and 2.5% respectively. Even the core inflation figure fell, worsening concerns that domestic price pressures were not as strong as expected.
Sterling has been dragged even lower by other UK ecostats as well.
Tuesday’s UK wage growth figure including bonuses didn’t advance as forecast, while Thursday’s UK retail sales prints from March all came in lower than forecast too. The retail data kept the Pound unappealing at the time of writing.
Indian Rupee (INR) Exchange Rates Fail to Capitalise on Pound Weakness
Investors haven’t found the Indian Rupee (INR) very appealing in recent weeks, which made it easier for a previously strong Pound (GBP) to boost GBP/INR to yearly highs.
Broad weakness in the Rupee has come from domestic concerns regarding India’s deficit and political uncertainties, as well as global issues like commodity trade.
Reuters forex analyst Krishna Kumar explained:
‘The Rupee is a justified exception with the jump in bearish bets reflecting its rising string of woes such as deficit concerns, political uncertainty and the rally in oil prices.’
As India’s economy typically benefits from cheaper oil prices, the commodity price rally has left the Indian Rupee looking less appealing.
Other global trade uncertainties such as the possibility of a US-China trade war have also pressured INR.
Pound to Indian Rupee Exchange Rate Forecast: Can GBP/INR Return to its 2018 Highs?
While the Pound (GBP) outlook has fallen due to expectations that the Bank of England (BoE) will slow down its planned pace for UK interest rate hikes, GBP/INR could still advance on Rupee (INR) weakness.
The Pound to Indian Rupee (GBP/INR) exchange rate continues to trend above the week’s opening levels and if Indian Rupee weakness persists the pair could rise again.
For example, if prices of commodities like oil remain strong the Indian Rupee is likely to remain unappealing. It also appears unlikely that India’s deficit problems will go away any time soon.
Stronger Pound demand would definitely help GBP/INR to advance again though. If Bank of England (BoE) officials remain relatively hawkish on the UK monetary policy outlook in upcoming speeches this would definitely boost Sterling.
Failing that though, Pound to Indian Rupee exchange rate investors may be waiting for next week’s key UK growth rate projections before making any major moves.